Geoffrey Goudy CPA » Budgeting & Planning Tips

Reducing Taxable Income FAQ

ggoudy — Sun, 24 Jan 2010 21:01:20 +0000

Question – We would like to reduce our projected taxable income but due to current cash flow volume, we are unable to reduce all of our accounts payable. Would it be wise to take money from our line of credit to pay vendors?

Or are we better off not taking out additional debt?

Answer – Yes, you can tap the Line of Credit to pay down vendors at year-end vendor as this will create additional permitted deductions for 2009.

My view is that this is not a “bad” use of debt. This recommendation assumes your company will be able to pay down the advance with the significant accounts receivable expected within the next 30 to 45 days. These amounts should be in excess of your daily operating needs.

Home Buyer Tax Credit FAQ

ggoudy — Sat, 02 Jan 2010 22:34:17 +0000

Question – I bought my home in 2002 so I should be eligible for the new homebuyer credit, right?
Answer – You’re not the first and won’t be the last to assume that the Federal credit was intended for all existing homeowners in good standing. It’s not immediately obvious that to qualify for the credit, you must sell your home and buy another one. Here’s the way it works.

The so-called ‘existing homebuyer tax credit of $6,500’ is available for homeowners who sell their current primary residence and buy a new primary residence. In other words, it’s for repeat buyers and only those who have owned their current homes for at least five years. Thus, taxpayers are only eligible if they have owned their homes for at least five years and acquire another between November 6, 2009 and April 30, 2010.

Estate Planning Mis-Cues – Amazing but True

ggoudy — Sat, 02 Jan 2010 00:59:22 +0000

This recommendation may seem obvious but I come across it all the time.

The number one avoidable estate-planning mistake made by individuals is failing to name a living beneficiary on all retirement accounts. Regardless of your will, if not done properly with the fiduciary, your estate will be exposed to higher taxes than the circumstances would require.

Without a named living beneficiary, the required account closure distribution amounts are either treated as estate income where the 35% Federal tax rate kicks in at $10,700 or are allocated in lump-sum to the beneficiary via Schedule K-1 and taxed at the individual’s tax rate in the year disbursed.

As a result, generous inherited IRA rules, such as stretching the account withdrawal and related income tax hit, are relinquished.

The numbers behind charts and graphs never lie

admin — Tue, 16 Dec 2008 07:26:06 +0000

Bar graphs and pie charts make good snapshots. However, don’t be fooled by what the picture painted may be saying about your company’s fortunes. Always digest the numbers behind the charts and graphs presented. This ancillary analysis completes the picture.

The 3 S’s

admin — Tue, 16 Dec 2008 07:25:48 +0000

Staff, Space, Systems. These three critical components represent the majority of your operating costs and failure to appropriately monitor them may lead to the dissolution of your business. Therefore, expand prudently and always have a written plan to ensure the future prosperity and goodwill of your Company.

Startup has no ideal timeframe

admin — Tue, 16 Dec 2008 07:25:34 +0000

There is no ideal time to start your business. Please make certain you’ve examined your “4 P’s” – Product, Price, Place and Promotion – before you entertain the enterprise setup process. Missteps can be made at any time during a business’s lifecycle; startup should be relatively pain free regardless of timing if you have a plan.

Share your success, spread the pain

admin — Tue, 16 Dec 2008 07:25:18 +0000

All too often the rewards of success are horded by few and sacrifice arising from failure is imposed on selected individuals or groups. Like it or not, every company is built on the premise of teamwork. So share success and spread the pain.

Read the fine print on all projections

admin — Tue, 16 Dec 2008 07:24:54 +0000

More times than not, long-term projections often miss the mark. And fail to account for the unexpected…good or bad. Yes, they provide a practical benchmark or reasonable basis for decision-making. But look at figures greater than one year out skeptically.

Joint Ventures

admin — Tue, 16 Dec 2008 07:24:37 +0000

Keep these arrangements simple. Have both parties contribute cash. And don’t contribute equipment. Sell it to the entity itself and have the entity obtain debt financing if necessary. If you want the accounting to be straightforward, then so should the JV arrangement.

Expand with a plan

admin — Tue, 16 Dec 2008 07:24:23 +0000

Expansion requires risk, luck, patience and sacrifice. Above all, understand that you don’t want to grow too much too fast and thus, allow increases to space, staff and systems expenditures to occur without a corresponding increase in revenues. Therefore, you must have a plan in place before implementation.